Gold continued to slide on Tuesday, deepening a bear market phase as investors pulled positions, with a stronger U.S. dollar and rising government bond yields reducing the yellow metal’s appeal.
Spot gold prices fell 2% before paring losses to 1% to trade at $4,335.97 an ounce. Gold futures for April delivery were last down more than 1% at $4,358.80 an ounce. Spot silver was down more than 3% at $66.93 an ounce, while futures were down 2.61% at $67.54.
The dollar is rising
The dollar index, which measures the dollar’s strength against a basket of currencies, rose 0.5% on Tuesday. A stronger dollar reduces the attractiveness of gold priced against the US currency, making it more expensive for holders of other currencies.
Spot gold has now lost more than 22% since hitting a record high of $5,594.82 an ounce in late January, with the precious metal losing nearly 10% last week, its worst performance since September 2011. The dollar index, meanwhile, has gained about 3% since the war began.
Market watchers attributed the decline to a mix of macroeconomic and positional factors.a
“Although gold initially rose because of the safe haven demand at the beginning [iranskog] conflict, prices have come down recently,” Rajat Bhattacharya, senior investment strategist at Standard Chartered, told CNBC.
“We’re seeing this pattern repeat itself during periods of heightened market stress as investors raise cash to pay margin calls or simply book profits where they can,” he told CNBC via email, adding that the dollar’s recent strength has also weighed on demand for gold.
Will interest rates rise?
Market participants also reassessed expectations for US monetary policy, and persistent inflation reduces the likelihood of aggressive interest rate cuts by the Federal Reserve, keeping government bond yields higher, SEEbiz reports.
Higher yields reduce the attractiveness of non-interest-bearing gold. The yield on 10-year government bonds was about 5 basis points higher at 4.384% on Tuesday.
Market participants have also reassessed expectations for US monetary policy, with persistent inflation reducing the likelihood of an aggressive rate cut by the Federal Reserve, keeping government bond yields higher.
Higher yields reduce the attractiveness of non-interest-bearing gold. The yield on 10-year government bonds was about 5 basis points higher at 4.384% on Tuesday.
